Case | HBS Case Collection | 1996 (Revised from original 1991 version)

Gordon Cain and the Sterling Group (A)

Abstract

A Houston-based LBO firm makes two petrochemical acquisitions that benefit from improved industry conditions and improved organizational performance. The LBOs generate huge increases in value, creating problems for managers, who have large, undiversified equity holdings. The firm decides to sell one company after a year, and to take the other company public after two. Allows students to examine the causes of organizational change, the difficulties of managing success in closely held LBO companies, and the relative merits of various exit strategies.

Keywords: Mergers and Acquisitions; Accrual Accounting; Investment Return; Balanced Scorecard; Equity; Performance; Contracts; Leveraged Buyouts; Organizational Change and Adaptation; Banking Industry; Chemical Industry; Houston;

Format: Print

25 pages

Purchase

Citation:

Jensen, Michael C. "Gordon Cain and the Sterling Group (A)." Harvard Business School Case 492-021, November 1996. (Revised from original October 1991 version.)

Coach Bob Hurley of St. Anthony High School is one of the winningest coaches in the history of high school basketball. At age 65, he has won more than 1,000 games and 25 New Jersey State Championships. His players come from the toughest streets in the country and yet all but 3 have gone on to college. As head coach, he earns less than $10,000 a year; his circa 1917 school building doesn't even have a gym. And yet, for almost 40 years he has turned down all offers to leave a small, aging, Catholic school in Jersey City, NJ. This is a biographical case about a tough-love leader who epitomizes what it means to be authentic. It was written for a course on authentic leadership development to highlight the origins and potential of deep self-knowledge and passion. Class discussion focuses on the tensions between extrinsic and intrinsic motivations and the role that this plays in our lives.

We summarize our new positive theory of integrity that has no normative content, and argue that there are large gains from putting integrity into finance—into both the theory and practice of finance. We define integrity as being whole and complete and unbroken. We argue that if finance scholars, teachers and practitioners take this approach to applications in finance there are huge gains to be achieved. We caution the reader that since our intention in this piece is to call attention to aspects of life and aspects of finance that are not commonly discussed, or certainly not discussed in the way we will do so here, you are likely to find it strange and even wrong or irrelevant. It is unlikely to fit your view of what a finance paper should be. And that will be encouraged by the fact that it is impossible to be complete on such a huge topic in one paper. As a young scholar, Michael lived through the days of the revolution in finance in the 1960s and 1970s when the modern approaches to finance were coming into vogue. Consistent with Kuhn's (1996) Structure of Scientific Revolutions, the established profession, and the established journals, systematically rejected such new thinking. But change did occur and we are committed to see such change continue to happen in the finance of today.

General Information

Academic Programs

Alumni

Faculty & Research

Recruit

Resources

Faculty & Research

Gordon Cain and the Sterling Group (A)

Abstract

About the Author

More from the Author

Contact

Related Links

Resources